Qatar Ban + Sanctions – Update from the Gulf

On 5 June 2017, three of the six members of the Gulf Cooperation Council (“GCC”), the Kingdom of Saudi Arabia (“KSA”), the Federation of the United Arab Emirates (“UAE”) and the Kingdom of Bahrain (“Bahrain”) have decided to severe their diplomatic ties with the State of Qatar (“Qatar”). The remaining two members of the GCC the State of Kuwait (“Kuwait”) and the Sultanate of Oman (“Oman”) do not support the ban.

The Republic of Egypt, the Republic of Yemen, the government of the Eastern part of Libya, the Republic of Maldives and the Islamic Republic of Mauritania have since joined part or all of the ban against Qatar.

On 23 June 2017, KSA, UAE, Bahrain and Egypt have handed to Qatar a list of 13 conditions to be met before restoring ties. The ultimatum ends on 4 July 2017. Qatar has already rejected these demands on the grounds that Qatar will not accept interference with its sovereignty.

What will happen on 4th July 2017 remains unclear. Certain non-official statements mentioned the possibility of having Qatar withdrawn from the GCC. However, under the GCC charter of 1981 decisions on substantive matters shall be taken at the unanimity. Other non-official statements mentioned, without detail, the possibility to extend sanctions to Qatar business partners.

This note only aims at providing situational awareness for freight forwarders using the UAE as a trade hub or platform towards the Qatari market. It is neither intended to comment in anyway on the diplomatic crisis nor to provide any specific legal advice for a particular situation.

Framework

Under the November 2013 Riyadh Agreement and the 2014 Comprehensive Agreement, the GCC member states agreed not to back anyone threatening the security and stability of the GCC, whether as groups or individuals, via direct security work or through political influence and not to support hostile media.

It is alleged that the State of Qatar has failed to implement these agreements.

Precedent

On 5 March 2014, Saudi Arabia, the UAE and Bahrain have withdrawn their respective Ambassadors from Qatar.

The diplomatic crisis lasted for eight months until a GCC meeting of ministers of foreign affairs took place on 16 November 2014.

III. The 2017 Qatar Ban

On 5 June 2017, the UAE Ministry of Foreign Affairs has released a statement regarding the severance of diplomatic ties with Qatar. The statement includes:

The severing of all relations with Qatar including diplomatic relationship. UAE diplomats have been recalled from Qatar and Qatari diplomats have been given 48 hours to leave.

A travel ban:

Qatari nationals are prohibited to enter the UAE.

Qatari visitors or residents in the UAE are given 14 days to leave the UAE.

UAE nationals are banned to travel or reside in Qatar.

A special directive based on humanitarian consideration has been taken in relation with joint Emirati/Qatari families.

Closure of borders and airspace

All Qatari means of transportation are banned from coming in or leaving the UAE and UAE airspace and sea territorial waters including seaports are closed to Qatari means of transportation after 24 hours (since 6 June 2017).

The other countries having issued a ban have taken more or less similar measures. They have to be checked on a case by case measure.

On 23 June 2017, KSA, UAE, Bahrain and Egypt subjected the restoring of ties with Qatar to the following 13 conditions:

To curb diplomatic ties with Iran and close its diplomatic missions there. Expel members of Iran’s Revolutionary Guards and cut off any joint military cooperation with Iran. Only trade and commerce with Iran that complies with US and international sanctions would be permitted;

Sever all ties to “terrorist organisations”, especially the Muslim Brotherhood, the Islamic State, al-Qaida and the Lebanon’s Hezbollah and to formally declare those entities as terrorist groups;

Shut down Al-Jazeera medias and its affiliate stations;

Shut down certain medias that Qatar funds, directly and indirectly: including Arabi21, Rassd, Al-Araby Al-Jadeed and Middle East Eye;

Immediately terminate the Turkish military presence in Qatar and end any joint military cooperation with Turkey inside Qatar;

Stop all means of funding for individuals, groups or organisations that have been designated as terrorists by Saudi Arabia, the UAE, Egypt, Bahrain, the US and other countries;

Hand over “terrorist figures” and wanted individuals from Saudi Arabia, the UAE, Egypt and Bahrain to their countries of origin. Freeze their assets, and provide any desired information about their residency, movements and finances;

End interference in the banning sovereign countries’ internal affairs. Stop granting citizenship to wanted nationals from Saudi Arabia, the UAE, Egypt and Bahrain. Revoke Qatari citizenship for existing nationals where such citizenship violates those countries’ laws;

Stop all contacts with the political opposition in Saudi Arabia, the UAE, Egypt and Bahrain. Hand over all files detailing Qatar’s prior contacts with and support for those opposition groups;

Pay reparations and compensation for loss of life and other, financial losses caused by Qatar’s policies in recent years. The sum will be determined in coordination with Qatar;

Consent to monthly audits for the first year after agreeing to the demands, then once per quarter during the second year. For the following 10 years, Qatar would be monitored annually for compliance; and

Align itself with the other Gulf and Arab countries militarily, politically, socially and economically, as well as on economic matters, in line with an agreement reached with Saudi Arabia in 2014.

The ultimatum to meet those demands ends on 4th July 2017.

Closing of the borders with Qatar

Air:

Qatar Airways offices have been closed in the UAE. In Saudi Arabia and Bahrain, the Qatar Airways licenses have been revoked.

In the UAE, Emirates, Etihad Airways and Fly Dubai have suspended flights to and from Qatar.

Since 6 June, airspaces from the Qatari Ban countries are now deemed closed to air traffic to and from Qatar as well as for transit.

Looking at the Flight Information Regions (“FIR”), Qatar has a little airspace inherited from the past regional radar locations. Qatar is locked surrounded by Bahrain, Saudi and UAE FIRs. However, as per International law, sovereign airspace is matching the 12 miles territorial waters of the states. The Qatar decree No 40 of 1992 defines such similar territorial sea for Qatar and the exercise of its sovereign rights over the overlying airspace. Qatar has an agreement with the Emirate of Abu Dhabi dated 20 March 1969 regarding their adjacent territories. Delimitation of adjacent territories between Qatar and Bahrain have been dealt with before the International court of justice’s through decisions from 1994, 1995 and 2001. Qatar faces Iran to the North and since the Qatar Ban occurred it is using this route to exit its civil flights.

Qatar (since 2008), the UAE (since 1972), Bahrain (since 1971) and Egypt (since 1947) are part of the International Air Service Transit Agreement signed on 30.1.1945 separately from the Chicago Convention 1944. Saudi Arabia is not. This agreement normally grants the privilege to fly across the territories of other member states without landing or to land for non-traffic purpose. In case of difficulties between member states the Chicago convention Council can be requested to examine the situation. In the given matter, security has been invoked to close airspaces.

Qatar has officially requested the International Civil Aviation Authority (ICAO) to intervene, without any result so far as this institution usually favours diplomatic solutions

Land:

The only land entry point to Qatar is Abu Samra, a border entry point with Saudi Arabia. This entry point has been fully closed and trucks coming from Saudi Arabia or the UAE and beyond cannot pass this border point anymore.

Sea:

On 6 June 2017 DP World has issued a circular to shipping lines, agents and port users regarding the entry restrictions to all Qatar vessels and cargoes.

According to the circular, vessels and cargoes will not be allowed in DP World UAE region ports. This prohibition includes (1) all Qatari flagged/owned vessels; (2) all vessels going to/coming from Qatar as last/next port of call irrespective of the flag; (3) vessels loading/discharging cargo destined to/from Qatar.[1]

On 11 June 2017 DP World has issued a second circular referring to a UAE government circular to all UAE ports asking them to implement the following measure: (1) not to receive any Qatari flag vessel or owned by Qatari company or Qatari individuals; (2) Not load / Unload any cargo of Qatari origin in any port or water of UAE; and (3) Not to allow ships to load any cargo of UAE origin to State of Qatar. This second circular less broad in scope than the first one, seems to prevail . A similar “Note to Mariners” has been published as No225 by the Port of Fujairah[2]..

Similar measures are taken in all UAE ports, including Abu Dhabi, Fujairah, Khor Fakkan. RAK or Sharjah.

Special mention shall be added here regarding the Port of Fujairah which is the host of the world second largest bunkering capacity in the world after Singapore. The Port of Fujairah has issued a circular No 224 [3] which states that “vessels flying flags of Qatar or vessels destined to or arrival from Qatar ports are not allowed to call Port of Fujairah and Fujairah Offshore Anchorage regardless their nature of call till further notice”.

From 12 June 2017, the Port of Fujairah seems to have eased the restrictions in place to allow for bunkering of foreign vessels which have loaded in Qatar.

Also, Non-Qatar owned, flagged or operated vessels seem not to have been restricted by the Saudi and UAE authorities to sail to and from Qatar for co-loading of crude cargoes.

Movement of Qatar foreign residents

The Qatar Ban states that expatriates in possession of a Qatari residence visa are no longer eligible to a UAE visa on arrival.

Schengen European nationals, holding a residence visa from Qatar, should still normally keep the benefit from the short stay visa waiver treaty signed on 6 May 2015 between the European Union and the UAE. Still, the situation remains to be monitored.

Trading with Qatar

The Saudi Central bank has prohibited banks from conducting transactions in Qatari Riyals and other banks in the region seem to have held Qatar transactions pending the directives from their respective central banks. The UAE Central Bank has ordered a due diligence on accounts or products the UAE banks may hold over Qatar Islamic bank, Qatar International Islamic Bank, Barwa Bank, Masraf Al Rayan, Qatar National Bank and Doha Bank.

While transportation alternatives to Qatar remain in theory possible through other routes, such as through Kuwait and Oman (which for now stand neutral in the dispute) or Iran which has offered transit facilities, it remains to be seen to which extent the severance of all relations, beside diplomatic relationships, applies to the UAE based business entities involved directly or indirectly in services or trade with Qatar. No circular or guideline has been yet published mentioning prohibition in this respect.

VII. Frustration, Force Majeure, Hardship

The Qatari Ban may cause contractual situations of “frustration” or “force majeure”, when the performance of obligations become impossible, or situations of “hardship”, when the performance of obligations become too oppressive from a financial perspective.

Regarding frustration or force majeure, under UAE law, article 273 of the UAE civil code states that “(1) In contracts binding on parties, if force majeure supervenes which makes the performance of the contract impossible, the corresponding obligation shall cease, and the contract shall be automatically cancelled;(2) in the case of partial impossibility, that part of the contract which is impossible shall be extinguished, and the same shall apply to temporary impossibility in continuing contracts and these those two cases it shall be possible for the obligor to cancel the contract provide that the obligee is so aware”.

Regarding contract to perform works (including work services) article 893 of the UAE civil code states that “If any cause arises preventing the performance of the contract or the completion of the performance hereof, either of the contracting parties may require that the contract be cancelled or terminated as the case may be”. Article 894 adds that “if the contractor starts to perform the work and then becomes incapable of completing it for a cause in which he played no part he shall be entitled to the value of the work which he has completed and the expenses he has incurred in the work in the performance thereof up to the amount of the benefit the employer has derived therefrom”.

Under other legal systems, reference must be made, as applicable, to the doctrine of frustration as it exists in common law jurisdiction or the doctrine of force majeure has developed in civil law countries (usually requiring an event which is external, unforeseen and irresistible). Most international conventions applicable to transport have exception of liability provisions that apply to blockades, restraint of States or unforeseen circumstances that can’t be avoided.

Regarding hardship, article 249 of the UAE civil code states that “if exceptional circumstances of a public nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge, in accordance with the circumstances and after weighting up the interests of each party, to reduce the oppressive obligation to a reasonable level if justice so requires and any agreement to the contrary shall be void.

VIII. Sensitivity of the matter

Due to the sensitivity of the matter, it is preferable and recommended, for those living in countries having severed ties with Qatar, not to make any public comment, online or otherwise and watch for their attitude in relation with the political aspect of the Qatar Ban. Forwarders should have their local employees to abide by such policy.

Way forward:

The situation is still very new and developments should be monitored very closely as the last ultimatum to Qatar from the banning countries is about to expire.

Logistics for goods inbound and outbound Qatar should avoid transiting through any of the countries which have entered the Qatar Ban and only legal alternative arrangements should be undertaken.

Legal provisions related to frustration, force majeure or hardship will only apply to situation where the circumstances causing harm were unforeseen at the time of contracting. This is no longer the case after the Qatar Ban has become public.

About the author:Dr Jean-Michel Moriniere is the forwarderlaw editor for the UAE. He is and advocate in France and has been a legal consultant based in the UAE for the past decade. He is a partner at Al Aidarous International Legal Practice, which has offices in Abu Dhabi and Dubai as well as an association with the Wong Partnership from Singapore. He is also a lecturer at Paris Sorbonne University Abu Dhabi.